The story of ecommerce in Russia is the story of a maturing digital economy, but also oil tycoons, a fugitive, allegations of corruption and human rights violations—and a guy known as the Darth Vader of Russia.
That’s because many of its most popular platforms have partnerships with and/or investments from organizations with links to the Russian Federation.
While Russia is the largest country on Earth, geographically, it has a population less than half the size of the U.S. It was hit hard by the global recession in 2009 and the World Bank forecasts its recovery will continue through 2020. But data from the World Bank also shows internet usage in Russia has grown sharply since 2009. By 2017, it was 76 percent, which puts it on par with the U.S.
And, with increased internet access comes more online shopping. The market is still pretty small, though: JPMorgan says ecommerce accounted for 6 percent of retail sales in Russia last year, or $23 billion of $361 billion. Experts call Russia’s ecommerce market “small and behind.”
“It’s not a wealthy country,” said Forrester analyst Sucharita Kodali. “That’s the great irony—it’s this huge international relations story mainly because they have nuclear weapons. Why they are even a story about hacking doesn’t make sense to me—they have so little money, what are they paying their hackers in? Vodka and beets?”
Nevertheless, JPMorgan says Russia is the fastest-growing international ecommerce market with 38 percent growth year over year. There’s opportunity.
It is also unique in that neither Amazon nor Walmart hold an interest. Combined, the American retail giants have footholds in every continent but Antarctica, but so far seem to have not set their sights on Russia.
Instead, and perhaps not surprising given the nation’s penchant for oligarchy, many of the biggest ecommerce platforms in Russia are home-grown entities with government ties. Wildberries.ru—which started out as a fashion retailer, but has expanded to sectors like beauty, electronics, household products, toys and even some groceries—seems to be the exception as it is owned by its husband-and-wife founders and one additional private investor.
Here’s a look at the other platforms vying for the hearts and minds of Russian consumers—and how they are connected to the Russian Federation:
Alibaba: Teaming Up With a Government Fund
Analytics firm comScore said ecommerce company Alibaba had the largest share of total unique visitors to retail sites in Russia in December 2017.
Similarly, analytics firm SimilarWeb found AliExpress, Alibaba’s ecommerce platform for small- to medium-sized businesses (SMEs), had 165 million average monthly visits in Russia and is second only to the Craigslist of Russia, Avito.ru, which had 314 million.
And it seems Alibaba wants to maintain its lead.
In September, the ecommerce company said it is partnering with the Russian Federation’s investment fund (RDIF), as well as telecommunications firm MegaFon and internet services company Mail.Ru Group, on a “social commerce venture” in Russia and the Commonwealth of Independent States (CIS), which includes Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan and Uzbekistan.
According to a release, the venture will include cross-border and local marketplaces, as well as first-party retail—and AliExpress Russia will provide consumers with products from Russia, China and further abroad.
As a result of its new partnership, AliExpress Russia gains access to Mail.Ru Group’s 100 million users. Alibaba also said the partnership will accelerate the development of Russia’s digital economy, and it plans to emulate its strategy from China’s developing market.
Yandex: Partnering With Putin’s Bank
Yandex, which is kind of like the Google of Russia, has 111 million average monthly visits, per SimilarWeb, making it another top destination for Russian consumers.